Rethinking Construction鈥檚 greatest effect has been on Britain鈥檚 biggest client: the government. Although the Ministry of Defence was pioneering prime contracting before the launch of the report, it has now absorbed Egan鈥檚 proposals in their entirety.
Now the Treasury is pushing prime contracting through its guidance document, the National Heath Service has pledged to introduce prime contracting for all non-private finance initiative work, and the DETR is staging a conference on Egan on 19 July.
MOD Defence Estates Organisation quality director Clive Cain is an Egan enthusiast. 鈥淓gan captured the concerns of clients in one report and it has had an amazing influence over the past year,鈥� he says. 鈥淣ow all of us clients have one hymn sheet to sing from. Prime contracting is all about driving out waste and is just one way of meeting Egan鈥檚 targets.鈥�
Now is the time for action, says Cain. 鈥淣ot warm words 鈥� action is the message we are pushing,鈥� he says. 鈥淭he time for talking is done. We want to see contractors benchmarking their performance, reducing waste and meeting Egan鈥檚 targets.鈥�
Cain says the major contractors have largely got the message and that this year it will start to trickle down to their suppliers.
Whereas some private sector clients, such as Railtrack, BAA and the major retailers, are Egan evangelists, others are more sceptical. One major City developer says that Egan has no place in his relationships with suppliers.
鈥淓gan is too rigid,鈥� he says. 鈥淲e build up relationships with our suppliers and keep using them until those relationships break down. Then we look for new partners.鈥� One-off clients stand to benefit from the Egan movement. The British Property Federation, among others, is keen to see leagues of contractors and consultants based on key performance indicators. This will give one-off clients a quantitative way of selecting contractors on performance as well as price.
The City sees the report as a way of making construction sexy. 鈥淚t promotes barriers to entry, differentiation and life-cycle costing 鈥� therefore I鈥檓 all in favour,鈥� says one banker .
The contractor鈥檚 view
We want contractors to benchmark their performance, reduce waste and meet Egan鈥檚 targets
Clive Cain, Ministry of Defence
Contractors bore the brunt of Sir John Egan鈥檚 criticism. Their training, leadership and site organisation all came under fire. How have they reacted to this slap in the face?
Major contractors
The bigger firms refuse to acknowledge that the Egan report has made any difference to their businesses. However, most are implementing Egan-like continuous improvement programmes to cut waste in production and are using performance indicators to measure how they are doing.
The view of Keith Clarke, chief executive of Kvaerner Construction, is typical. 鈥淓gan has made a considerable difference to the construction industry, but only we [Kvaerner] affect our own business,鈥� he says, dismissing Sir John鈥檚 direct influence on the contractor. Clarke explains that Kvaerner has had a continuous improvement programme running for the past 30 months and that the board takes direct responsibility for the policy.
Although Kvaerner uses its own business-specific performance indicators, Clarke does support the Movement for Innovation鈥檚 10 key performance indicators. 鈥淭here should be generic key performance indicators so that performance can be measured and the best performers rewarded,鈥� he says.
Construction managers such as Bovis and Mace are, arguably, further down the line in embracing Egan. Like the major contractors, construction managers claim they were implementing Egan-like measures well before Rethinking Construction was launched.
Bovis used productivity monitoring on the recently completed City of London office, Garrard House, and is updating the methods on Christ Church Court 鈥� another big City office that is on site. The firm has even gone as far as to employ a continuous improvement and best-practice manager, and is using the Movement for Innovation key performance indicators to measure its performance. Mace, too, is using methods of continuous improvement and process monitoring on work for BAA, among others.
Medium-sized contractors
These firms realise they have some catching up to do. One medium-sized south coast contractor admitted that his company was embracing Rethinking Construction wholesale to keep up with major contractors. The firm鈥檚 managing director says: 鈥淚f we don鈥檛 keep up with the majors on things like supply-chain management, we will lose out on work by default. They will take our market.鈥�
We have far greater problems dealing with skills shortages. We can鈥檛 get bricklayers to save our lives
Small Midlands Contractor
The managing director admitted that he has used the Movement for Innovation鈥檚 key performance indicators to measure the performance of his own company. 鈥淚 was hoping we would come out well, but we were average,鈥� he laments. On a positive note, he adds: 鈥淎t least it has focused our minds for the coming year. This is year zero 鈥� now we know what we鈥檙e up against.鈥�
As for the Egan targets of 10-20% efficiency improvements to be made each year, the contractor is sceptical. 鈥淚 don鈥檛 think we can make those kind of improvements unless we take control of the whole construction process, including management of the design,鈥� he says.
Nick Higgs, managing director of Bristol-based Cowlin Construction, says the Egan report has made no difference to his company. The contractor, which turns over 拢50m a year, is not using key performance indicators or supply-chain management. Higgs adds that Egan does not even seem to be having an effect on his clients.
鈥淐ompetitive tendering is still king but with more and more two-stage bids,鈥� he says.
Like most companies involved in housing, Rydon Construction remains largely unaffected by the Egan agenda. Colin Dixon, managing director of the 拢50m-a-year turnover contractor, says: 鈥淗ousing associations have been tightening the screws for years now, so we have been reducing waste in our processes, and this has meant innovations.鈥�
As well as reducing costs through close management of site waste, Rydon has been dealing with a tight band of regular subcontractors for years. And, just like the alliances being created by the major contractors for prime contracting, Rydon manages the workload so that the subcontractors do not get overloaded, and makes sure they have enough turnover to keep in good financial health.
Small contractors
Ian Davis, director-general of the Federation of Master Builders, says Egan has had a limited effect on his members over the past year. He questions how applicable it is to small builders. For instance, he says: 鈥淐oncurrent engineering 鈥� running design and construction in parallel 鈥� is fine on major projects, but is it applicable to house extensions?鈥�
Davis admits that some of the ideas are useful and that it is best for his members to start remodelling their businesses now, rather than have changes forced on them by players up the supply chain. His one piece of advice to members is: 鈥淒on鈥檛 worry if you鈥檙e not benchmarking right now, but watch the layer above, because it won鈥檛 be too long before you will be expected to do the same.鈥�
When it [prime contracting] all blows up, we will be waiting to pick up the pieces
Partner of top QS
The managing director of one 拢12m-turnover Midlands contractor dismissed the Egan report as irrelevant. 鈥淲aste is a factor of complexity. Most of our jobs are so small that it is not a factor,鈥� he says. 鈥淣o one ever mentions Egan to us. We have far greater problems dealing with day-to-day issues like skills shortages. We can鈥檛 get bricklayers to save our lives.鈥�
The consultant鈥檚 view
Large architects
Although most architects profess never to have heard of Sir John Egan, some are starting to take on the message. According to Penoyre & Prasad partner Sunand Prasad, those practices that don鈥檛 embrace the Egan movement will be left behind. 鈥淭he problem is going from good intentions to making it happen,鈥� he adds. This is a problem for Prasad鈥檚 practice. 鈥淲e are very busy, so it is hard to start measuring our performance,鈥� he says.
Small architects
Robert Sakula of Ash Sakula is waking up to the benefits of benchmarking. He is benchmarking his practice against 30 others that went on a recent business management course for architects organised by management consultant Caroline Cole.
鈥淭here were lots of business issues like finance, salaries and fees that needed to be better understood,鈥� says Sakula. 鈥淲e need to know how others work so that we can compete effectively 鈥� and so that we don鈥檛 all reinvent the business wheel.鈥�
The practices, ranging from large commercial to small residential, are now filling in benchmarking forms, says Cole. 鈥淭he information will be pooled and each architect will receive a half-day briefing to explain where they are and how they might improve.鈥� It is understood that the RIBA is considering adopting the benchmarking methods to assess all its members.
Quantity surveyors
QSs are split into two camps: those for the Egan agenda and those against it. Sir John has warned time and again that QSs must change or die. EC Harris, Gleeds and Franklin & Andrews are hell-bent on changing their businesses from quantity surveying to management consultancy. And all are helping their clients use the Movement for Innovation鈥檚 key performance indicators or are developing business-specific performance indicators for clients. For instance, Franklin & Andrews and Gardiner & Theobald are advising Railtrack on the kind of indicators it should use to start benchmarking suppliers.
